January 2022
Source: Ratehub @xelan_gta
SALE FORECASTS FOR 2022
2021 was a record sales year. While we do not expect the same numbers in 2022, do not expect a significant drop off. While we believe that many local buyers are ‘shopped out’, immigration numbers that were not seen in 2021 will balance out any shortfall. Still a lack of new listings will slow the market, and this will deter some buyers from moving. Sales will exceed 100,000 units this year making it the second or third best year.
Source: Toronto Regional Real Estate Board
WHAT FACTORS WILL IMPACT THE MARKET IN 2022?
1 Mortgage Rates will be higher. Our forecast is that variable rates will be still at 2% by year end and fixed rates will be 3%. Buyers still have to qualify at 5.25% so these changes will have a minimal impact.
2 Inflation is baked into the cost of new housing as it will be higher by 10+% in 2022. This will also impact the resale market for price increases.
3 Immigration to the GTA had a minimal impact in 2021. It will be far more important in 2022 as the Federal Government returns to its immigration goals of 400,000 people per year (with 33% heading to the GTA.
4 Availability of listings for sale. This is the wild card. Lower listings will result in flat sale numbers (compared to 2021) and a continuation of rising real estate prices.
PRICE FORECASTS FOR 2022:
The lack of new listings is the biggest factor impacting prices going forward. Prices will continue to increase across the board. Condo increases in the 416 area will outperform the market as it represents a catch up, and also that the price gap with low rise freeholds will narrow due to affordability issues. While wages will rise by 5% and Government hand outs have increased disposable income, at some point you price growth slows.
NEW OR PRE-CONSTRUCTION MARKETS
Key concerns about ‘affordability’ can be traced back to the pre-construction market and the lack of supply of new units. In the GTA we need about 40,000 new units annually just to keep up with population growth. During the past ten years, we have averaged just under 30,000 units. The shortfall is now 100,000 units. See the Table below which shows new completions by year. What this means?
1 Pre-construction prices will increase by 15% this year due to inflation, labour shortages, and from people who cannot buy in the resale market.
2 There is a shortage of low-rise product which is forcing many into the condo market.
3 The gap between new and resale has narrowed over the last year, making the new market more attractive to investors and end users.
4 The 416 market will become more popular. The best projects are those where people can walk, bike, or use an electric scooter. The challenge for people coming back to the office for some or all of the time is that they do not want to use the TTC and driving will become impossible with new bike lanes, patios, and ongoing construction.
5 In prime markets, get used to $1,500 per square foot.